Judge Randolph M. Hammock, Case 20STCP02196 2022-08-10 Tentative Ruling

This is an interpleader action filed pursuant to Code of Civil Procedure § 386, by American Modern Home Insurance Group, Inc (“American”). Respondents are Vicki Laken (“Laken”) and the Kent Sherwood 2011 Trust (“the Trust”) through its Trustee, Mihana Mitchell (“Mitchell”).

On May 10 and 11, 2022, this court held the Phase One Non-Jury trial to determine which party is entitled to recovery of the interpleaded funds. This court found that Laken is solely entitled to the interpleaded funds at issue, but that the funds are not to be released until there has been a final resolution or determination of the remaining claims.

Cross-Defendant Laken’s Demurrer to the Second, Fourth, and Fifth Causes of Action is SUSTAINED. Generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) Cross-Complainant must demonstrate this possibility at the hearing.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (CCP § 430.30(a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Id.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, 147 Cal.App.4th at 747.)

Cross-Defendant argues that the declaratory relief cause of action fails as a matter of law because this court already tried the phase one interpleader claim. While Cross-Defendant is correct, this court agrees with Cross-Complainant that the declaratory relief claim also seeks a judicial determination of “the Trustee’s right to sell the property without rebuilding and for damages arising from Cross-Defendants’ behavior.” (FACC 72-73.)

It is well stablished that a demurrer must, at the very least, eliminate at least one entire cause of action, and cannot eliminate portions of a cause of action. Accordingly, Cross-Defendant’s Demurrer to the First Cause of Action is OVERRULED.

“The elements of fraud that will give rise to a tort action for deceit are: (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e. to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974 [internal quotation marks omitted].)

Cross-Defendant contends that Cross-Complainant’s cause of action for fraud lacks the required specificity, the “how, when, where, to whom, and by what means” of the representations. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) However, the Lazar case specifically addresses “[a] plaintiff’s burden in asserting a fraud claim against a corporate employer[.]” (Ibid.) Cross-Defendant is not a corporate entity, but rather an individual, and so is more aware of what representations she did or did not make and in what capacity she made them.

Cross-Complainant alleges that Cross-Defendant represented to AMIG that Kent Sherwood was still alive—when in reality, he had passed away—to change the named insured to herself. (First Amended Cross-Complaint ¶ 75.) Necessarily, this must have occurred in the roughly two-month period between when Mr. Sherwood died (January 18, 2018) and when Cross-Defendant was added to the policy (March 21, 2018). This is sufficient detail for Cross-Defendant, the individual alleged to have made the representations, to be on notice of the substance of the claim.

Cross-Defendant further contends that Cross-Complainant has not pled its own reliance on Cross-Defendant’s representations, but rather, only AMIG’s reliance. Reliance by the plaintiff is an essential element of fraud. (See Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1088-9; Seeger v. Odell (1941) 18 Cal.2d 409, 414.) Cross-Complainant’s pleadings are clear that the party who heard the representations and relied on them was AMIG, not Cross-Complainant. (Cross-Complaint, ¶ 75.) In opposition to the demurrer, Cross-Complainant contends that “the false misrepresentations were made to a representatives [sic] and fiduciaries of the Cross-Complainant, JE BROWN and AMHIG.” (Opp. 3: 22-23.)

Though not expressly stated, it appears Cross-Complainant is attempting to rely on either an “indirect misrepresentation” or “indirect reliance” theory. “California courts recognize the principle of indirect misrepresentation, under which a knowingly false statement is no less actionable because it was made to an intermediary who then conveyed it to the party ultimately injured. (Varwig v. Anderson–Behel Porsche/Audi, Inc. (1977) 74 Cal.App.3d 578, 580, 141 Cal.Rptr. 539; Massei v. Lettunich (1967) 248 Cal.App.2d 68, 73, 56 Cal.Rptr. 232.) However, this doctrine requires that the defendant intend or has reason to expect that it will be “repeated and acted upon by the plaintiff.” [Citations.] In this case, there are no allegations that AMIG (an intermediary) “conveyed” or “repeated” the alleged misrepresentation to Cross-Complainant, and nothing to suggest that the misrepresentation was “acted upon” by Cross-Complainant. At most, Cross-Complainant was a passive victim of the fraud.

Similarly, “[u]nder the principle of indirect reliance, a fraudulent misrepresentation is actionable if it was communicated to an agent of the plaintiff and was acted upon by the agent to plaintiff's damage.” (Lovejoy v. AT&T Corp. (2001) 92 Cal. App. 4th 85, 95.) Cross-Complainant has presented no authority demonstrating that there exists an agency or other sufficient relationship between an insurer (AMIG) and a former insured (Cross-Complainant) to invoke this doctrine. For these reasons, this court agrees that Cross-Complainant has not adequately pled reliance.

Cross-Complainant also alleges that Cross-Defendant “made statements to the management of [SSMHP] to transfer the site ownership share of [SSMHP] to herself in just two days,” even though Cross-Defendant “knew that she did not have an ownership interest” in the property. (FACC 83, 84.) For the same reasons as above, this claim is also insufficiently pled. Cross-Complainant only pleads that SSMHP, an intermediary, relied on Cross-Defendant’s misrepresentation, but has not invoked any theory purporting to demonstrate that this reliance can be imputed to Cross-Complainant.

Last, but not least, although this Court did not make any formal findings of fact in Phase One, the ruling in favor of Laken does imply that this Court in determining whether Laken had unclean hands, it found that the evidence insufficient to establish that Laken made any affirmative representations to AMIG that she was the widow (or had been married) to the decedent. In short, this Court opined that AMIG likely assumed (incorrectly) she had been married to him.

Accordingly, Cross-Defendant’s Demurrer to the Second Cause of Action is SUSTAINED. Generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) Cross-Complainant must demonstrate this possibility at the hearing.

When Cross-Defendant demurred to the Cross-Complaint, she challenged the cause of action for trespass to chattels, but not the conversion cause of action. This court sustained the demurrer to the trespass to chattels claim with leave to amend. It appears that the First Amended Cross-Complaint has omitted the trespass to chattels claim but incorporated the allegations from that claim into the conversion claim. Thus, Cross-Defendant argues that Cross-Complainant modified the conversion claim without leave of court to do so.

“It is the rule that when a trial court sustains a demurrer with leave to amend, the scope of the grant of leave is ordinarily a limited one. It gives the pleader an opportunity to cure the defects in the particular causes of action to which the demurrer was sustained, but that is all.” (Community Water Coalition v. Santa Cruz County Local Agency Formation Com. (2011) 200 Cal.App.4th 1317, 1329.) However, “[t]his rule is inapplicable [when] the new cause of action directly responds to the court's reason for sustaining the earlier demurrer.” (Patrick v. Alacer Corp. (2008) 167 Cal. App. 4th 995, 1015.)

When this court sustained the previous demurrer to the trespass to chattels claim, Judge Rice found that the allegations had amounted to a “permanent deprivation or destruction of personal property.” (See Ruling 08/05/2021.) Thus, these allegations were more appropriate for a conversion claim, not trespass to chattels. Under these circumstances, then, it appears appropriate for Cross-Complainant to incorporate those allegations into the conversion claim. In effect, this modification was in “direct[] respon[se] to the court's reason for sustaining the earlier demurrer.” (Patrick, supra 167 Cal. App. 4th at 1015.) For these reasons, and to avoid an endless pleading battle, the court finds the amendment proper. Cross-Defendant has not otherwise attacked the conversion cause of action.

Cross-Defendant argues Cross-Complainant was not given leave to add this declaratory relief claim, which appears to replace the claim for Breach of Trust Agreement contained in the original Cross-Complaint. The court sustained Cross-Defendant’s demurrer to the Breach of Trust Agreement claim with leave to amend. Like the above cause of action, this court finds that the “new cause of action directly responds to the court's reason for sustaining the earlier demurrer.” (Patrick v. Alacer Corp. (2008) 167 Cal. App. 4th 995, 1015.) Based on the express grant of leave to amend, Cross-Complainant has modified the First Amended Cross-Complaint to assert a viable claim—for pleadings purposes, at least.

Cross-Defendant next argues that the cause of action is untimely under a two-year statute of limitations set forth in CCP Section 339(1). The Trust provides that the property “shall be held for the use of Vicki Laken during her lifetime, as long as it remains her primary residence and provided that she pays in a timely manner all expenses related to said home including but not limited to all mortgage and/or loan payments, taxes, assessments, insurance premiums, homeowner association fees and dues, maintenance, repairs and regular upkeep.” (FACC ¶ 113.) Cross-Complainant contends that “Cross-Defendant has failed to comply with the terms of the Trust,” and seeks a judicial declaration that this failure terminates her “Right to Occupy” the property if and when the property is rebuilt. (FACC ¶¶ 111, 112.)

It is unclear from the face of the FACC when this cause of action accrued. In opposition, Cross-Complainant contends it was not until “May or June 2020 that the Trust was told that Cross-Defendant would not pay the money owed,” and that the statute of limitations does not begin running until this time. However, based on the ambiguity, it is not unreasonable to assume the Trust was aware of the money owed prior to the November 2018 fire.

Based on a two-year statute of limitations, the claim is untimely. Without much explanation, Cross-Defendant contends the claim is timely under the “relation-back doctrine.” The doctrine states that “where an amendment is sought after the statute of limitations has run, the amended complaint will be deemed filed as of the date of the original complaint provided recovery is sought in both pleadings on the same general set of facts.” (Lamont v. Wolfe (1983) 142 Cal. App. 3d 375, 378.) Although this court agrees that it must look to the date of the filing of the original Cross-Complaint, that does not help Cross-Complainant. Cross-Complainant did not bring the original Cross-Complaint until January 4, 2021 and was thus untimely even from that date. If leave to amend is given, Cross-Complainant must clearly plead when the cause of action purportedly accrued, and whether it is relying on a form of equitable tolling.

Accordingly, Cross-Defendant’s Demurrer to the Fourth Cause of Action is SUSTAINED. Generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) Cross-Complainant must demonstrate this possibility at the hearing.

The elements of intentional interference with contractual relations are “(1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (I-CA Enterprises, Inc. v. Palram Americas Inc. (2015) 235 Cal.App.4th 257, 289.) “However, consistent with its underlying policy of protecting the expectations of contracting parties against frustration by outsiders who have no legitimate social or economic interest in the contractual relationship, the tort cause of action for interference with contract does not lie against a party to the contract.” (Applied Equipment Corp. v. Litton Saudi Arabia, Ltd. (1994) 7 Cal.4th 503, 514. This is because interference is a tort, and “[c]ontract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at that time; consequential damages beyond the expectations of the parties are not recoverable.” (Id. at 515.)

This court agrees with Cross-Complainant that Cross-Defendant was not a party to the contract in the usual sense. It would appear that at the time of the interference, Cross-Defendant was not a party to the contract. It was only through her alleged interference that she became a party to the contract. But this court does not need to resolve that issue at this time, because the claim is barred on statute of limitations grounds. The statute of limitations for this cause of action is two years. (CCP § 339(1).) The allegations regarding Ms. Laken interfering with a contract to which she was not a party pre-date the Woolsey Fire, which occurred in November 2018. Cross-Complainant did not bring the original Cross-Complaint until January 4, 2021, and was thus untimely.

Accordingly, Cross-Defendant’s Demurrer to the Fifth Cause of Action is SUSTAINED. Generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) Cross-Complainant must demonstrate this possibility at the hearing.

A motion to strike lies either (1) to strike any irrelevant, false or improper matter inserted in any pleading; or (2) to strike any pleading or part thereof not drawn or filed in conformity with the laws of this state, a court rule or order of court. (CCP § 436.)

Cross-Defendant argues that Cross-Complainant is not entitled to recover attorney’s fees. Courts are given “broad discretion” when ruling on a motion to strike. (Camenisch v. Superior Court (1996) 44 Cal.App.4th 1689, 1699). Courts need not strike a prayer for attorney’s fees before a party “has had a full opportunity to determine, through discovery, whether a basis for recovery exists.” (Id.) Thus, the court is not inclined to strike claims for attorney’s fees at this stage.

The last paragraph under the Fourth Cause of Action reads in full: “to California Welfare and Institutions Code section 15657.5 and punitive damages.” (FACC ¶ 118.) This appears to be a typo, and it is also unclear how any portion of this cause of action invokes the California Welfare and Institutions Code or punitive damages.

Accordingly, the motion to strike this paragraph is GRANTED. Generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) Cross-Complainant must demonstrate this possibility at the hearing.

Cross-Defendant also moves to strike the entirety of the Third Cause of Action for Conversion. As discussed in the preceding Demurrer, this court found it appropriate for Cross-Complainant to incorporate the allegations from the trespass to chattels claim into the conversion claim, since this modification was in “direct[] respon[se] to the court's reason for sustaining the earlier demurrer.” (Patrick, supra 167 Cal. App. 4th at 1015.)

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.